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May 23 2014

A Man of No Convictions

National Review
Jillian Kay Melchior

In 2008, a Philadelphia electrical contractor named Donald “Gus” Dougherty Jr. pleaded guilty to 99 counts, including illegally gifting more than $100,000 in free work to a union boss and stealing from the health and welfare fund of the International Brotherhood of Electrical Workers Local 98, of which he is a member.

But since Gus Dougherty was released from prison in November 2010, the same union he stole from has given his company, Dougherty Electric, Inc., at least $270,000 “to subsidize contractor to create jobs,” records filed with the Department of Labor show.

That’s just one of many oddities surrounding the interactions between Gus Dougherty and his company and Philadelphia’s Local 98 and its powerful boss, John “Johnny Doc” Dougherty. Though the two men share a last name and have been friends since childhood, they’re not related, according to court records and several newspaper articles.

The story is even stranger, given the new release of a 2006 affidavit by a Federal Bureau of Investigation agent who had successfully sought a search warrant for Johnny Doc’s South Philly house. A Philadelphia judge unsealed the document late last month, and though Johnny Doc was never charged with any crimes, the affidavit details a federal agent’s suspicions that he had violated labor laws by accepting a gift from Gus Dougherty and had also committed income-tax evasion and filed false tax returns.

National Review Online e-mailed Local 98 requesting an interview with Johnny Doc. Frank Keel, a communications consultant for Local 98, would not comment, and Johnny Doc did not respond to our request for an interview.

The affidavit does raise questions, though: For example, one might wonder why no charges were ever filed against Johnny Doc, given that the indictment said that the union boss was involved in some of the crimes to which Gus Dougherty pleaded guilty.

For example, Gus Dougherty pleaded guilty to providing approximately $115,600 in free work at Johnny Doc’s row house at East Moyamensing Avenue.

It was illegal for Gus Dougherty, as an employer of union members, to give a bribe, payment, or thing of value to an official of Local 98, which was representing his workers. The same law also makes it illegal for a union official to receive such a gift.

According to the indictment, Gus Dougherty didn’t send Johnny Doc any invoices or bills for his home renovation until after federal agents had already conducted their searches on Gus Dougherty’s home and business. According to the 2006 affidavit, federal agent Kathleen O’Hanlon wrote that “it is my opinion that John J. Dougherty unlawfully received the renovation and electrical work done to his house and that John J. and [his wife] Cecilia Dougherty never intended to pay for any of the renovation and electrical costs incurred by DEI.”

In a sentencing memorandum, Gus Dougherty’s lawyers said he “did not intend to invoice John Dougherty for the full fair market value for the work done.” But that was, they claimed, not “to induce any quid pro quo” but because “John Dougherty is one of the ‘surrogate’ father figures whom [Gus Dougherty’s psychiatrist] refers to in his report. The approval and respect of such figures was ‘vital to [Gus’s] self-esteem.’” Johnny Doc was never charged or convicted for receiving a thing of value from Gus Dougherty.

Gus Dougherty’s indictment also alleges that Johnny Doc, who was serving as president of the Pennsport Civic Association, had asked Gus Dougherty to put a PCA employee, who was the relative of another union official, on Dougherty Electric’s health-coverage plan. At Gus Dougherty’s direction, the indictment says, “forms were prepared which falsely identified [the PCA employee and union-official relative] as an employee of Dougherty Electric and were submitted to Independence Blue Cross to begin her health coverage.” For this, Gus Dougherty pleaded guilty to health-care fraud. Johnny Doc was not charged or convicted for any role in the fraud.

The health-insurance company wasn’t the only one Gus Dougherty was deceiving. He pleaded guilty to stealing approximately $869,599 from the Local 98 health and welfare fund. For years, Dougherty had been maintaining a cash payroll system; between 2001 and 2005 alone, he and his workers received more than $2.5 million in cash.

Gus Dougherty also pleaded guilty to tax fraud, one count of which involved money from Local 98’s Job Recovery Program, which Johnny Doc manages, according to the affidavit and a source within the union.

When a union contractor is at a competitive disadvantage during the bidding process against an open-shop or non-union contractor, Local 98 officials can give Job Recovery Program funds to the union contractor to make up the difference, allowing, in effect, a lower bid. Between 2002 and 2004, the indictment stated, Dougherty Electric received approximately $672,625 from IBEW 98’s Job Recovery Fund, transactions authorized by Johnny Doc. In 2008, thePhiladelphia Inquirer reported that “Dougherty Electric Inc. received nearly $900,000 in subsidies between 2001 and 2005 from Local 98’s job-recovery fund.”

The indictment detailed how Gus Dougherty would deposit the funds in a Dougherty Electric account and then have an employee “withdraw the proceeds as cash or obtain a bank check for [Gus Dougherty’s] personal use.” Dougherty admitted that he failed to report much of the money on his personal-income tax filings.

In the newly unsealed FBI affidavit, FBI agent O’Hanlon wrote that “according to the information obtained during this investigation,” Job Recovery Fund checks were first issued to Dougherty Electric, Inc., and then the company was asked “to prepare paperwork to justify the issuance and amount of the checks.”

O’Hanlon continued:

I believe that [Gus Dougherty] has received monies from the Job Recovery Program in a manner dictated by John J. Dougherty or his representatives and inconsistent with the design and purpose of the Job Recovery Program. [Gus Dougherty] caused the checks from the Job Recovery Program to be cashed and had the cash brought back to him. [His] receipt of the money was only occasionally recorded on DEI’s financial records. According to a DEI employee, [Gus Dougherty] usually took the proceeds from the cashed checks and left the business premises with cash in hand, on one occasion saying that he had to go see John J. Dougherty.

The affidavit also later notes that “John J. Dougherty also received, deposited and withdrew substantial amounts of cash from 2002 through 2005 in what appears to be an effort to conceal financial dealings.” Though a warrant was granted to O’Hanlon, Johnny Doc was never charged or convicted.

When Gus Dougherty was sentenced after pleading guilty to 99 counts, he received only two years in prison, though the Philadelphia Inquirer at the time noted federal guidelines recommended a minimum of 33 months.

Dougherty’s lawyers painted him as a good-hearted man struggling with childhood strife and alcoholism. As the Philadelphia Inquirer reported from the courtroom, U.S. District Judge Gene E. K. “Pratter said her decision was influenced by the outpouring of support. The judge said she read 294 letters from Dougherty’s relatives, neighbors, employees, colleagues and friends.” (Some of the most colorful involved Gus Dougherty’s rescuing an 86-year-old woman from a burning home and helping an escaped victim of rape and assault.) The Inquirer continues:

“It conjures the movie It’s a Wonderful Life,” Pratter said at the outset of the hearing.

“That’s my favorite movie,” Dougherty replied.

“I would hope so today,” Pratter said.

The court had ordered Gus Dougherty to pay $673,070 in restitution to Local 98. While Gus Dougherty was in prison, the union’s annual filings with the U.S. Department of Labor stated that “Local 98 is in the process of conducting a payroll audit on Dougherty Electric. At this time, the dollar amount owed to the operating funds of Local 98 is undetermined.” But it’s unclear from the union’s public filings whether an internal determination was ever reached or whether Gus Dougherty ever compensated the union. An NRO e-mail asking a union spokesperson about Gus Dougherty’s restitutions and the results of the audit went unanswered.

After Gus Dougherty’s release, a source in the union tells me, Local 98 has continued to direct business to Dougherty Electric, even as many members have struggled to make ends meet since the recession began.

Meanwhile, Dougherty Electric has once again begun receiving funds from the Job Recovery Program, records filed with the Department of Labor show. In 2011, Local 98 gave the company a $170,000 subsidy — the third-largest awarded that year. And in 2012, Dougherty Electric also received a $100,000 subsidy; only three larger ones were granted that year.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity. She is also a senior fellow at the Independent Women’s Forum.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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